Intraday trading which is also known as day trading refers to buying and selling of stocks as well as other financial instruments in a single trading day. In other words, intraday trading implies that all positions are squared-off prior to the market closing and hence, there would be no change in ownership of shares due to the trade results.
Until now, people looked at day trading to be an area exclusively set aside for financial firms as well as professional traders. But this is not the case anymore as electronic trading and margin trading has revolutionized this.
Intraday trading vs regular trading
There’s just one difference between a regular trade and an intraday trade which is with respect to the stock delivery. In intraday trading, you balance and close your positions on the same day. Hence, your sell order is balanced out by your buy order. As a result, the ownership of shares is not transferred. A regular trade is settled over a few days or maybe a bit more. Thus, the shares you buy are delivered and the ones you sell are moved out of your Demat account.
Basic rules for intraday trading
Any type of trading comes with a set of rules and regulations. Below are some basic rules for every intraday trader:
Do your research
Proper research and analysis with respect to the present market situation, fundamentals of the companies being traded, and information about macroeconomic details like a country’s debt status or currency movements must be taken into account.
Invest what you can afford to lose
Intraday trading can be very risky. It is best to not invest more than you can afford to lose.
Entry, exit and stop points
Choosing the right value for entry and exit is important. It becomes easier to set an escape value for a crisis situation.
Don’t overtrade
The share market may not always trend in a predictable manner. The ideal way to practice intraday trading is to trade just a few scrips at a time.
Evaluate your performance
Intraday trading can be dynamic. Maintain track of your performance including your wins and losses. It would be useful in getting the hang of what went wrong and what went right which would further assist you in making better trading decisions in the future.
Is intraday trading for you?
Intraday trading offers great returns which might make it seem very attractive. But it may also include a far greater risk when compared to the delivery segment. Hence, if you have a full-time job, you might want to avoid intraday trading.
For starters, intraday trading requires you to assess the market and time your trades perfectly. Next, you need to have a thorough understanding of and time to practice technical analysis on daily charts to be able to make the right decisions.
Advantages of intraday trading
Some of the benefits of intraday trading are:
- Greater margins available to traders compared to investors
- High return potential
- Low brokerage charges particularly with the trade-free plan option.
- Short-to-medium horizon for strategies to pay off.
The forex market is the largest and most liquid financial market in the world, where currencies are bought and sold. It operates 24/5 and involves a diverse range of participants, including central banks, commercial banks, institutional investors, and retail traders.
